The reader wrote: "To my knowledge this practice has been ruled illegal due to the fact that when a person transfers people for compensation, or in this case, to split the cost, then this person needs a special permit to do so, like a bus, taxi, etc. Secondly, there is also a risk that the insurer will not pay out in the event of an accident as car is not being 'used' as specified in the insurance contract."

Trevor Devitt, head of client care for Outsurance, sheds some light on the issue.

Taxi/lift club

Taxi and lift club vehicles need to have a permit. The road authorities issue these permits. These vehicles carry fare-paying passengers and are on the roads throughout the day ferrying people around. Passengers pay a fare for the trip, whether single or monthly.

Informal lift clubs

There are many people who run informal lift clubs. These may consist of a group of people who work for the same company and travel to work together by car. The vehicle used is then parked at the premises for the entire day. The members of these groups usually have a quid pro quo arrangement where each member uses their car for a month, or week. There is no formal "fare-paying". According to Devitt, Outsurance would accept this kind of arrangement as they understand the convenience factor associated with car pools.

The problems

Increased exposure is a key issue. A car that spends a lot of time on the road has more chance of being involved in an accident, than one that is driven once or twice a day. A car that is used during peak hours is exposed to some risk, but not as much as one that is driven throughout the day.

Increased liability is also relevant. Liability covers third parties that may be injured or killed by the person driving the car. (I have simplified the principle because liability is a complex issue.) A car loaded with passengers carries an increased risk. This risk also increases with the frequency with which the car is driven.

Lift schemes impact on the cover provided by the Road Accident Fund (RAF). There is also an impact on the basic conditions of cover, which exclude the loss or damage caused to a vehicle used to carry fare-paying passengers. This includes taxis and lift club vehicles. The bottom line is that you should call your insurer to ensure that you are correctly covered.